40:40 vision

Despite the progress in getting women directors into Australian listed company boardrooms, progress at executive levels has stalled, according to the 2021 CEW census. Advocates are calling for a new round of targets.

Women are just as scarce in top executive roles in Australian businesses as a decade or more ago, despite plenty of formal commitments to increase diversity and inclusion. A cascade of recent analysis paints a bleak picture and concludes change will only occur when there’s more active intervention, with targets for women in senior ranks one of the most practical steps. Boards play a crucial strategic role in introducing and supporting executive targets that are well-designed, realistic — and deliver results.

Many leaders in the business community recognise something has to change. An increasing cohort of Australia’s top listed companies have introduced 40:40:20 (male/female/flexible) gender targets based on a compelling economic and risk mitigation rationale.

Diversity of thinking makes for a healthy team and there’s clear evidence that better gender balance in leadership is not only fairer, but also good for business, says Debby Blakey GAICD, CEO of superannuation fund HESTA. Diversity also supports better performance, better governance and stronger long-term value for shareholders and investors.

Despite growing pressure from investors, the 2021 Chief Executive Women (CEW) census shows women still hold only 26 per cent of executive leadership roles in the ASX 300, well below the gender balance level of 40 per cent. Women continue to be significantly underrepresented in the CEO, CFO and line roles that feed into top leadership, with only 18 women CEOs in the ASX 300. And of 23 ASX 200 CEO appointments in 2020–21, only one was a woman. The proportion of women on ASX 200 boards hit 34.2 per cent at the end of November 2021, according to the AICD’s latest gender diversity report.

Setting targets

It’s obvious from the census that action is needed right now, CEW president Sam Mostyn AO said at the report’s launch, and the push for targets will ensure that the talent and leadership of women is no longer ignored or wasted.

Blakey notes the evidence increasingly shows that well-designed targets deliver results, with organisations that set targets for executive leadership more likely to achieve balanced representation of men and women.

While a commitment to targets is key, it’s essential for boards to start by setting out a clear explanation of why diversity matters, says Xero chair and former Telstra CEO David Thodey AO FAICD. “It’s really important to understand why you think diversity and diversity of thinking is important as a board and as individuals,” he says. “Once you get there, you have to set targets or you don’t know how you’re going. What you measure is what you achieve. It’s a leadership issue for boards — they set the culture and environment.”

Telstra had introduced targets before his tenure as CEO from 2009–15, and while the proportion of women in the executive leadership team has fluctuated (as of 30 June 2021, female representation at executive management level was 33 per cent) those shifts should not be a negative influence on where you want to be, he says, adding that the idea that targets compromise merit is a false trade-off. “It’s like a lot of issues,” says Thodey. “We tend to put things at different ends of the spectrum, but it’s not about meritocracy or gender balance — we can have both concepts.”

Choosing a CEO who has strong values around diversity and inclusion is another way the board can help, along with making sure there are a good number of female candidates. Targets, he adds, need to be set all the way through an organisation and not just at the top. “Then check and see how you are going, get the data and look at it. Where aren’t you making progress? That often comes back to leadership. Look at policies that may be disadvantaging any group... you have to be an advocate for change.”

The board’s role is to demand data and once it’s there, get the executives to report on it and show them what’s behind it — why more men, for example, are getting through the ranks faster than women, says Dr Terrance Fitzsimmons, senior lecturer in leadership with the UQ Business School and managing director of the Australian Gender Equality Council. “That’s the critical role boards can play. And demand they’re told why any differences are going on. The board has to agree on targets and metrics, and hold people to account for them.”

Targets are not a new approach and have long been applied in the public sector. Setting targets has boosted the ranks of women senior executives (SES) from 26.8 per cent in 2001 to 50 per cent in 2021, according to CEW data. The Department of Foreign Affairs and Trade set targets in its five-year Women’s Leadership program, which delivered an increase of women at SES level from 36 per cent in 2015 to 43 per cent in 2020, while women heads of missions increased from 25 per cent to 43 per cent.

However, making sure targets deliver requires more than setting a broad goal and expecting results to emerge quickly. It’s essential to ensure that there are pipelines for women to move into top jobs, says Thodey, and also to keep a close eye on where women are being employed in an organisation, while creating opportunities for them to get experience in critical line roles.

Breaking down barriers

It’s also about interrogating the barriers to entry for top jobs. It could mean the board asking if you really need, say, an engineer for a CEO role, says Fitzsimmons, who has conducted research studies for the Workplace Gender Equality Agency (WGEA) and AICD. “One WGEA Employer of Choice asked, ‘do we need an engineer?’ You don’t have to get wedded to the idea that it has to be a certain skill set.”

While there has been progress for women on listed company boards, the need for targets at executive level is a different challenge, he says. “There’s a similarity in the starting position, you are over the hurdle of supply with boards, but that’s a fight that has to be re-won with women in executive ranks.”

However, the pressure is building with institutional investors increasingly pressing for results. HESTA, for example, has launched a campaign — 40:40 Vision — to encourage organisations to sign up to delivering change and boosting numbers, pledging to achieve a gender balance of 40:40:20 in executive leadership by 2030. Signatories to 40:40 Vision include ANZ, BlueScope Steel, South32, BHP, Origin Energy, Tabcorp, Ramsay Health Care, Viva Energy, Webjet and Domino’s Pizza.

Nevertheless, the current environment is very different to 2009, when pressure built to get more women on listed boards, notes Fitzsimmons. It’s not the same world and it will take the corporate sector and leaders to force the issue and make progress.

“You can’t pick and choose or say, there’s a target and we’ll get there one day,” he says. “It’s not a simple journey. Even with the right frame of mind and metrics, it’s about the bias that you have to overcome. A 40:40:20 can’t do it in a decade — it will take longer.”

Thodey agrees, saying it will be slow progress, with lots of bumps in the road — and nowhere near as fast as we’d like.

But it’s also becoming apparent that investors understand the true financial risk associated with a lack of gender diversity, says Blakey. Which means now more than ever, companies that fail to measure, manage and improve the diversity of their teams risk getting left behind. “Gender equality is not about compromising merit — a more diverse workforce makes good business sense. It’s an economic imperative.” 

Five steps for action

Companies can take further action by: 

1. Defining precise targets for all leadership roles, particularly for line roles to build the CEO pipeline.
2. Breaking down gender balance targets by division to demonstrate contribution to an organisational target.
3. Ensuring targets are based on current workforce data including growth, promotions and attrition, and that they are achievable and provide stretch goals.
4. Incorporating targets in leaders’ KPIs to improve accountability and sponsorship.
5. Sharing gender targets and updates on achievements, internally and externally, including reporting to the board on a regular basis.